In the past, just as we have seen this year, these risk-parity-correlation tantrums have been cushioned by equity market inflows, and we note that, in particular, YTD equity ETF flows have surpassed the $100bn mark, a record high pace.

If these equity ETF flows, which JPMorgan believes are largely driven by retail investors, start reversing, not only would the equity market retrench, but the resultant rise in bond-equity correlation would likely induce de-risking by risk parity funds and balanced mutual funds, magnifying the eventual equity market sell-off.

Which could be a problem…

As ETF outflows are surging…

And as Morgan Stanley’s Christopher Metli – who previously explained what happens when VIX goes bananas – notes, today’s moves lower are likely not being driven by systematic supply – this appears to be more discretionary selling.

Systematic supply from vol target strategies is largely out of the way now, while consensus trades are getting hit: NDX is underperforming SPX, momentum is down 1%, and the Passive Factor is up, indicating actively held names are underperforming names better held by passive funds.

So why now, even though the systematic supply is largely out of the way?